The CARES Act contained several retirement fund provisions.
We are providing an overview of a few that related to individuals. We strongly
recommend consulting your tax advisor for information on your particular tax
situation and the impacts of these provisions on your specific situation.
These all pertain to coronavirus related distributions or loans
from qualified plans.
A coronavirus related distribution is made after January 1,
2020 and before December 31, 2020 to an individual:
- Who was diagnosed with COVID-19 or SARS-CoV-2 by
an approved CDC test
- Whose spouse or dependent was diagnosed with an
- Who suffered adverse financial consequences from
being furloughed, quarantined, laid off, having to take care of children due to
lack of childcare related to the virus or other factors as determined by the
Secretary of the Treasury.
- 10% penalty waiver for coronavirus related
distribution up to $100,000 before December 31, 2020 for people under 59 ½.
- Distribution will be included in taxable income
over a 3-year period beginning with the distribution year. The taxpayer may elect
to include it in the first tax year.
- The taxpayer may make contributions back up to
the amount of the distribution to the fund that had the distribution on the
date after the distribution up to the 3-year mark. Then transaction will be
classified as a qualified roll over and not subject to income tax. If taxes
were paid on the money, an amended return would be necessary to recoup the
- If a taxpayer has multiple plans, the
distribution amount eligible for these tax benefits is no more than a total of
- Plan administrators may rely upon an employee’s
certification that the conditions for the coronavirus distributions have been
- Distributions are not subject to withholding tax
- The loan amount from qualified employer plan is
increased to the lesser of $50,000 or one half of the present value
non-forfeitable benefit. This is only available for 180 days from the day after
CARES Act was enacted (March 27, 2020).
- If the due date for a loan repayment from a
qualified plan occurs between the enactment date and December 31, 2020, the due
date will be delayed one year, and all subsequent payments will be adjusted to
reflect the one-year delay.
- Required minimum distributions will be waived
- If a required distribution has been taken in
2020 prior to the enactment, it is eligible for roll over with some exceptions.
- For beneficiaries of an inherited IRA in 2015 or
later subject to the 5-year payout rule, it is now a 6 year rule and 2020
distribution requirement is waived.
Guidelines are being drafted on certifications and other
components. This is an evolving process.